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Mean reversion and autocorrelation in profitability of Illinois farms

Mean reversion and autocorrelation in profitability of Illinois farms Economic theory implies that firms in a competitive market will adjust to longrun equilibrium levels of profitability, resulting in mean reversion of profitability. Partial adjustment models are applied to farmlevel data from Illinois to test for mean reversion and autocorrelation in profitability. Results show that farm businesses revert to individual levels of expected profitability at an annual rate of 0.5, while the annual rate of negative autocorrelation is 0.175. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Agricultural Finance Review Emerald Publishing

Mean reversion and autocorrelation in profitability of Illinois farms

Agricultural Finance Review , Volume 65 (1): 10 – May 5, 2005

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0002-1466
DOI
10.1108/afr.2005.65.1.87
Publisher site
See Article on Publisher Site

Abstract

Economic theory implies that firms in a competitive market will adjust to longrun equilibrium levels of profitability, resulting in mean reversion of profitability. Partial adjustment models are applied to farmlevel data from Illinois to test for mean reversion and autocorrelation in profitability. Results show that farm businesses revert to individual levels of expected profitability at an annual rate of 0.5, while the annual rate of negative autocorrelation is 0.175.

Journal

Agricultural Finance ReviewEmerald Publishing

Published: May 5, 2005

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